The fireside chat with CBRE Group. It's my pleasure to introduce Bob Sulentic, who is Chair and CEO of the company. My name's Tony Palaone. I cover real estate stocks and research, and so we welcome you here for this event. Are we okay on the mic? Oh, okay. Should I repeat myself for the webcast? No. Do it. Repeat myself? Okay. Yeah. Sorry. Mic was off, so I'll repeat myself. Welcome, everybody, for the last session of the day with Bob Sulentic, who is Chair and CEO of CBRE Group. It's my pleasure to welcome him and you all for a discussion here for about 30 minutes. My name's Tony Paolone. I cover CBRE, among other real estate stocks in the equity research department. Let's get into things. I'll try to go for about 20 minutes or so and open it up for Q&A. But first, Bob, give us a quick description in a couple of minutes of what CBRE does. Okay. First of all, Tony, thanks for having us here, and it's good to be with everyone. CBRE is a global commercial real estate services and investment firm that's beginning to migrate into infrastructure in addition to commercial real estate in a reasonably meaningful way. We're the largest firm in the world that does what we do. We describe ourselves as being diversified across four dimensions, the first one being asset types. We do extensive work in office buildings, distribution centers, multifamily, healthcare buildings, increasingly data centers, almost any kind of commercial building you could imagine we do work in. The second dimension is the client type. We work for all types of occupiers and investors in commercial real estate. Again, it would be hard to find occupiers or investors around the world that we don't do some work for. The third dimension is service type. Again, we do almost everything that you can do in commercial real estate. We do building management work, project management work, or we do capital improvements. We provide financing. We're an intermediary on both the seller side and the buyer side for the sale of assets and the leasing of assets. Increasingly, we're doing technical services for assets, buildings like, again, data centers. The fourth dimension is geography, and we operate in 100 countries around the world. What's notable as it relates to our position in the market and our opportunity is that we're not just spread across those four dimensions, but we're, in most cases across those four dimensions, we're the market leader. It means we have significant breadth and depth to go along with that breadth. A very central part of our strategy is that we are trying to drive resources, the time of our management team, the focus of our business, our capital, our balance sheet resources into areas that are either resilient because they are acyclical or countercyclical, or they are resilient because they are in areas of secular tailwinds. Data centers are a great example of that. We do a lot of project management work in support of infrastructure, etc. Being big across those four dimensions and deep across those four dimensions and then pursuing an expansion strategy into the areas that are resilient is characteristic of what we do. What we like to say about our company is our opportunity is defined by the base of commercial real estate assets around the world, which is enormous, as you all know. While we're very big for what we do, we have a very, very small percentage of the market in general across those four dimensions. Yeah. Maybe let's stay on this idea of resilient businesses because it's been such a big focus of yours for a number of years now. How would you characterize where CBRE is today? Should we expect the resilient businesses to continue to grow and things like the more traditional CRE to be a bit smaller as a piece of the pie, or are there opportunities across all of this? There is an important thing there that I want to hit before I'm done. I am going to start with the resilient businesses. We characterize our businesses as being one of two types: either resilient because, as I said earlier, they're countercyclical or acyclical, or resilient because they have these secular tailwinds. We do also have cyclical businesses, transactional businesses that we've been big in historically and we're the market leader in. The move into the resilient businesses has been disproportionate to the transactional businesses and very steady over the last decade-plus. If you went back to 2010, 2011, around in that time frame, we would have been around 30% resilient with the balance being transactional or more cyclical. Today, we're 60/40 in the other direction, 60% resilient. Even in this part of the cycle where we're experiencing really strong growth in our transactional businesses, our cyclical business, or excuse me, our resilient businesses are growing as rapidly as our transactional businesses. Of course, when the transactional businesses slow down, the resilient businesses grow even more rapidly. In aggregate, throughout that entire period, we've grown on a compounded basis well into the double digits, top and bottom line. We would expect the trend for the relative balance between resilient businesses and transactional businesses to keep moving in favor of the resilient businesses. The thing I wanted to come back to, though, is we're not trying—we're not getting there by trying to get out of the transactional businesses. Those businesses are very good for several reasons. First of all, they generate a lot of profits, and they have great cash conversion. The minute you make the money, you turn it into cash. They have great margins, and they provide a tremendous amount of market insight for us. If you look at our—we're the largest broker around the world. We have 12,000-14,000 brokers. Everything we do, we gain information from about the markets around the world through that base of brokers. We have a very large valuations business. We're the largest valuer in the world. We learn a lot through that valuations business that we use in other parts of our business. We are disproportionately growing those resilient businesses, and we expect that to continue. Does the customer base crossover? Is there an opportunity? Because when you talk about these resilient businesses, a lot of them are just sheer additions of capabilities you have. What is the customer crossover like, and do you have the opportunity to sell all of CBRE to these folks? For much of what we do, the customer base is overlapping. If you look at some of our biggest clients around the world, they are large, what we call occupiers. The biggest tech companies in the world, the biggest financial institutions in the world, big manufacturers, hospital systems, etc. Those systems need to have their buildings managed. They need to have projects done, capital projects done. They also buy and sell and finance assets, and we provide those services to them. The clients are common. What's gone on with us in the last several years, Tony, and is really accelerating now, is we're working for another set of clients, sometimes within the same company. That is clients that do critical infrastructure and data centers. If you went to the biggest tech companies in the world, the first group of services I talked about, building management, project management, mortgage origination, and so forth, that's all handled by the real estate people. The data center work is handled by a completely separate buyer within those organizations, a separate customer. We have built a client team that's separate to interface with that group of clients, often within the same company. I understand. Maybe let's stay on the data center piece because it is very topical these days. You all have given pretty specific numbers. We'll call it ± 10% of the business, effectively, of CBRE is data centers. Can you maybe talk a little bit about, first, some perspective? Where was that, say, five years ago, maybe? Or how rapidly has that grown? Should we expect that to continue at that sort of pace? I say this only slightly, tongue in cheek. If you go five years before that, it was not a big enough deal that we kept track of it separately. It is now a very big deal for us. We think last year it was around 10% of our earnings. We think it is likely to go up this year and continue to go up in the future. We do work for data centers across all four of our reportable segments. I want to walk you through what those segments are. One is what we call the thing we are historically most known for that we have done the longest, which is advisory services. That is brokerage work, valuations, and so forth. We are a very large seller, lessor, and mortgage origination provider of data center assets. Next is project management. That is our Turner & Townsend business. That's where you actually oversee the creation of assets or the improvement of assets physically, the construction of assets. In that area of our business, we are doing work, either program management or project management or cost consultancy on around 150 hyperscale-type data centers. That is a very significant part of that business. We are also doing internal work, internal projects, smaller project work in what we call the white space. The third area of our business is building operations and experience. That is where we manage the ongoing management of buildings. That is a very, very large business for us. We manage around 800 data centers around the world. We physically manage the buildings of those data centers. The last area of business for us, our fourth area, is what we call real estate investments. We have an investment management business there, and we have a development business there. In our development business, we do a lot of land acquisition and development work. We are developing and selling a considerable amount of data center land again to these large users. We have an infrastructure sleeve of assets that we manage within our investment management business. We do some data center investment there. Data center investment as owners is not a big part of our business, but all the other parts are very large. Right. I mean, on that note, you recently, and it's not all data center related, but you've made a couple of acquisitions, with the most recent being Pearce, which you just closed on $1.2 billion. Can you maybe tell us a little bit about that and how it fits into both? It sounds like digital infrastructure more broadly. Yeah. Pearce Services is a digital infrastructure critical facilities project management company. They do work for things like tel centers, tel towers—sorry to get those words backwards—wind turbines, backup power generation systems, etc. They operate across the US and then off-site, in addition, in India with about 4,000 technicians. Very technical work. It operates at a higher margin than the rest of our building operations and experience business. It is an absolute, as we like to say, bullseye for our strategy. It is technical services. It is infrastructure. It is secularly benefited. It meets our definition of resilient. It has had a strong growth profile. We think there are significant opportunities to synergize it with other things we do, most notably our data center work. Got it. Tell us about, you also purchased, I think it's about a year or so ago, DirectLine. Yeah. DirectLine has been, along with Turner & Townsend, two of the biggest success stories we've ever had in terms of acquisition. What DirectLine does is project work inside what they call the white space in data center halls. So where the computer and data storage equipment resides, they do project work in there. The wiring, cabling, racking. They do some HVAC work and electrical work. Importantly, their client base is, we're not allowed to name the client base, but you would find it very familiar. It's the most important hyperscale companies in the world. Got it. If we step back, I mean, it was great to hear about the data center and digital infrastructure initiatives and these deals and how it is across all of these functions. How about the rest of when we think of just BOE and project management? You have talked about those businesses growing double digits and perhaps even maybe a bit more. How do you get there? What are some of the sectors underlying? Because it sounds like the digital infrastructure piece, I think we can all get, but the growth across those businesses has been pretty strong, and your outlook seems pretty strong. To highlight this, I want to talk about project management. The industry that we kind of have been in forever, we and our competitors have always done project management. The way we've done it is it's what we call an attached business. If we're leasing on behalf of tenants and we sign a big lease, there's project work that needs to be done, built out of the space for them. If we're representing a building as a landlord, same thing. There's leasing, there's fit-out work that needs to be done. When we represent corporates in handling their real estate, they have a lot of project work that needs to be done in conjunction with the ongoing management of facilities. Those businesses were typically attached to those parts of the businesses. It wasn't managed centrally. Several years ago, we started building a relationship with this company, Turner & Townsend. Their approach to project management was very, very different. It was an integrated enterprise. They had global leadership. They operate in 60 countries. They did big, complex projects for the same client base, often, so for corporates. They would do the big work that we and our direct competitors were not able to do. Beyond that, they did energy-related work, infrastructure work. For instance, Turner & Townsend is doing big program management at 40 international airports around the world. I mentioned already that they do a lot of these hyperscale data centers. They are doing a nuclear power plant in the UK They are doing work in areas that go beyond what we were doing. They do one of the things that we are so interested in doing when we do M&A. They expanded our total addressable market. They moved up the technical chain, which we want to do. The work they're doing is very much in secularly favored areas. We have ended up with this business. When we bought Turner & Townsend, they had grown. Our CFO here and head of M&A is Emma Giamartino. Emma, their growth rate for the five or so years before we bought them was 15%. Since then, it has been 20%. We have been able to take Turner & Townsend, bring them into the CBRE family, and give them access to clients that we had. They can do things for those clients we could not do. Their growth rate was already very strong. It has gone to 20%. That project program and cost consultancy business is now a $3.5 billion business with 22,000 employees, completely unfamiliar to anything that was going on in our sector before we bought them. Wow. Interesting. I mean, I think that's a great example about just your ability to kind of bring something onto the CBRE system and drive more revenue and production out of the people. How should we think about, though, the white space that you see for CBRE, whether it's geographic, other capabilities we're not thinking of that you may or may not want to tell us about that you'd like? There's a few things I wouldn't talk about. Okay. What would you? First of all, I want to go back to something I said at the outset. We define our opportunity by the base of commercial real estate assets around the world. You hear that and you say, "Okay, I know what commercial real estate is." This is what I always tell our people when I go around to our offices and ask, "What do you think the opportunity for CBRE is?" Step back and just think for a minute. You are in this city or any other big city in the United States or around the world, and you look out the window and you see all these office buildings, way more office buildings than any one company comes close to managing. What you do not see is you do not see any distribution centers. You do not see any data centers sitting here. You don't see any hospitals sitting here. You do see multifamily, institutional quality multifamily. You don't see manufacturing facilities. We do work for all those things. We don't just do it in this city. We do it all around the world. There is so much that we can do that we haven't yet gotten to because that base of assets is so big. We're expanding it now. Data centers weren't in the discussion before. Certain geographies weren't in the discussion. When I first came to CBRE through the acquisition of Trammell Crow Company in 2006, Japan was kind of an afterthought for us. It's our second most profitable country operation in the world right now. We have a very large business there. That was white space. One of the things CBRE has done quite well is across those four dimensions: client type, geography, service type, and asset type, we've expanded the envelope that we're working in, expanded the total addressable market, and moved into that total addressable market pretty aggressively as we did with the acquisition of Turner & Townsend, as we did with the acquisition of DirectLine, getting us into another kind of white space, the data center white space. That's very central to our strategy. We have a massive amount of, I can tell you, I've been in the business for 41 years. Between Trammell Crow Company and CBRE, I've been fortunate to be a CEO for 21 years. I've never felt so confident in our ability to grow the business as I feel about CBRE going into 2026. Wow. That's very good to hear. In terms of that growth, maybe shift this over to capital allocation because you do produce a lot of cash. You are excited about the business. You see great prospects. You have already made a big acquisition pretty recently. What do you do with all your cash as you look ahead? We have, and again, I mentioned Emma earlier. She runs that for us. We really invest our capital in the following ways. Number one, we have CapEx. Computers, equipment we use to run our business, that's pretty standard. Everybody does that. M&A. We are a consistent M&A company. That's core to our strategy. We build our business through M&A. We grow our TAM through M&A. We have a very defined set of places strategically that we're looking for to grow our business through M&A. I would tell you the Pearce acquisition could not have been more on target for what we want to do. The DirectLine acquisition could not have been more on target for what we want to do. We have a handful of other things we're looking at. Beyond the CapEx, that's the number one place that we try to aim our capital. We have a sizable real estate investment business that generates really good opportunities for us to invest either in funds that we manage, coinvest, or directly into real estate assets through our real estate development business. We are constantly looking for opportunities to invest there, particularly when we see opportunities as we have the last couple of years that others in the market are on the sidelines and not investing in. That has played out very well for us over the last 10-12 years. We continue to be excited about that. As you know, when we do not have opportunities in those areas, we will buy back our stock if we believe it is trading below its intrinsic value. We believe it is now, and it has been for the last several years. We have invested several billions of dollars in buying back our stock. Great. Before I open it up for some questions, I would like to just hit on the transactional business, leasing, capital markets. You guys had a very strong leasing quarter in 3Q. I think we all got a little surprise on the upside with strong industrial trends. How do things feel in both of those segments as we start to look ahead? I'm going to comment on it in two ways, Tony. First of all, our leasing business is a really, really important business. As I mentioned earlier, it's an excellent cash flow generator. It has great cash conversion. It's got great margins. It provides tremendous strategic insight for us in terms of what's going on with occupiers and investors in real estate around the world. We've really focused on the growth of that business. We've upgraded our talent. We've upgraded our lease management platform. It's very hard to figure out if you're in the brokerage business over a year or two if you're taking market share because it ebbs and flows. It's so clear what's happened in that leasing business the last couple of years. We have definitively taken market share. That's part of the leasing story that I wanted to mention. The other part of the leasing story is what's going on in the market is good. I'm going to start with office buildings. We went through this COVID and then post-COVID era where we kept saying our return to the office, return to the office. I think we're beyond return to the office. I think where we've gotten to now is it's more of a return to the mean. People are starting to think about office space the way they thought about office space historically. I'm going to add one component to that. Just like if you look at distribution centers and see how much more integral they are to these e-commerce companies than warehouses used to be when I started, office buildings, and your company is Exhibit A, by the way, office buildings have become incredibly important to companies in terms of creating an experience for their employees, making their employees productive, making their employees excited about coming to work. The base of chief executives across the United States and around the world have been beating the come back to the office drum for a few years now. What we've all figured out is none of those mandates work nearly as well as having an attractive place for people to come to. That attractive place is partly about the physical plant, but it's partly about the experience you operate. In that regard, we went out and bought a company called Industrious. That's another company we bought in the last couple of years, which is an office building experience company and flex company. We now have that offering to give our clients that others do not have. The office building trajectory for leasing is good. We have been through a little bit of a soft market after years of a great market on industrial or logistics leasing. That is coming back. We had a great third quarter, but everybody had a great third quarter. If you look at Prologis, the biggest industrial REIT, they had a very strong quarter. What is happening is some of the big users, some of the big names that were out of the market are coming back. They have burned through their inventory, and they are coming back into the market. We're expecting that by mid-year next year, the low point in the kind of somewhat down cycle we've been through will have been met, and we'll be coming back up. We're pretty bullish about industrial now too. We don't even need to talk about data center leasing. Right. Yeah, that. Let's get some questions here. We'll start there. Yeah. Can you talk a little bit about this commercial real estate cycle? What ending are we in? When did it start? How long will it last? Or your question. Yeah. You know, we used to get that question, and we used to think it was one thing, right? We know now it's not. We know now that the capital markets don't move in sync necessarily with the leasing markets, and the office leasing market doesn't move in sync with the industrial market, etc. What I would say is the leasing markets are back pretty strong. We think they're going to continue to be strong, but they've probably come back closer to peak than the capital market side of things. Capital markets is getting stronger, but we anticipate a slower, more steady recovery. Coming out of most downturns, you have lower interest rates, or you have interest rates that you can bring down, higher interest rates that you can bring down to push the market forward. That's really not seeming to be the case in a big way this time around. We think the market's going to recover more slowly. Credit's coming back into the market. There's a huge amount of pent-up sell demand and buy demand, lots of capital on the sidelines. You know, you hear that phrase there of a wall of capital. It's true. We're in the investment management business. We got billions of dollars of capital we'd like to deploy. We're in the development business. We've got many assets that we hold that are great assets that we're going to sell at the right time. That's all the gap between buying and selling prices, or the buy-ask bid, buy-sell bid is closed. We think it's going to be more of a long, steady comeback. We expect next year to be better than this year was, but it'll be slow. Does that answer it? Not really, but. Give me a follow-on question. Do you think you'll grow organically total company faster next year than this year? I don't know that we'll grow faster. I think we'll grow organically next year. We'll be very happy if we grow as fast organically next year as we did this year. Can you do as fast? We haven't finalized our thinking on that yet. Okay. Hi. I just focused back on the hyperscale that's spending so much money, and you look like you're rolling with that business. Can you just tell us, do you turn key data centers, or is that contemplated with your acquisitions? As well, can you tell us how real estate and power seems to be so important? How that goes in? Do you have a relationship? If you're looking at that business, can you tell us about backlogs or margins or some parameters you consider in the area? Yeah. That was a lot of questions. When you say turnkey, I do not know what you—we are not an owner of data centers. We manage them. We help them be built. We project manage the building of them. We do project work inside the data centers, inside the white space where the technical equipment is, but we do not own them. We can do turnkey. We can do everything from buy the land to build the building to finish out the—not the equipment in the building, but connect the equipment in the building and put the HVAC and electrical infrastructure, power infrastructure into the building. We can do all of that. We do all of that, but we generally do not own them. What was your other question? Relationships with any power real estate? We have a land development business, and we have developed, acquired, and developed a good number of data center sites. There has been a radical change over the last couple of years in the ability to get power for those sites. Not surprisingly, that is the big bottleneck now. We do work with the utility authorities, and we do have, we think, some unique capabilities in that area and some unique relationships. We also have some relationships with the hyperscalers that allow us to be more productive because it is like so many things in life. If in state X or city X, if you go to the power authority and say, "I'm going to build a spec data center," they are like, there are a lot of those out there now. If you go and say, "We are coming with this user that you want in your state or in your municipality," you have a very different profile. We have learned to work that circumstance effectively. Question here? Just one thing at the same time. Can you elaborate on the across the opportunities? We talked about it a little bit on the last call, whether that's Turner & Townsend, whether that's Trammell Crow, BuildSoup, whether that's Industrious. How long does it take to set yourselves up organizationally to actually execute on that for yourself? How big of a needle mover is it? Yeah. It's a huge needle mover, but not in the way people think it is. We typically wouldn't expect our facilities management people to go in and say, "I'm going to sell you a package of facilities management services. And while I'm doing that, I'm going to sell Turner & Townsend to you." What would happen is you'd have a big corporate. Now, sometimes we do sell them in a packaged way, and we've got quite a bit of business like that. What would typically happen, and what we've learned is particularly powerful, and what our clients want is—they're consumers like we are. They think the way we think. If we do facilities management work for them, and we've done building leasing work for them or tenant rep work for them, and maybe they've hired us to do valuations work, and they've seen us do a bunch of great work for them. These are typically big complex buys, right? Then they need project management work. They immediately think of us, right? That's where the cross-sell comes in. That's been a very powerful thing for us. That's why when we acquired DirectLine and we did our due diligence on DirectLine, and we went to the hyperscalers they work for, they encouraged us to buy DirectLine because they thought having DirectLine on the CBRE platform would provide things for them, for one thing, capital, the ability to expand, the ability to invest in the business. When Vince Clancy, the CEO of Turner & Townsend, goes in, and he has access to a lot of the senior most corporate real estate people in the world. He says, "We're now a CBRE, and we can do all this stuff for you that we do in project management. By the way, I can tell you how good they are at this other stuff." That builds awareness and increases the odds. Vince won't usually walk out the door with a contract to sell his product and to sell facilities management, if that makes sense. Sometimes he will. All right. Anything else here before I throw one last one out for you? I'm going to ask on technology. I think you gave the example of. Curious what other areas are best in terms of either internal technological applications and the impact you think that product will be. The biggest one I'd point to is data, market knowledge. We all like to throw around the term data, but what it really is is knowledge of what's going on in the base of commercial real estate assets around the world. We are by far the biggest broker in the world. We have 12,000 brokers doing transactions of every type you can imagine, every type of building you can imagine. We have massive amounts of that data. We're the biggest valuer in the world. We have massive amounts of information about the value of buildings around the world. We have an investment management business with about $155 billion of assets under management. We have a huge amount of information about that. Here in the U.S., we have the biggest development company in the world, Trammell Crow Company. We do an enormous amount of research and underwriting every project we do. We manage literally 8 billion sq ft of real estate around the world. That's the property and facilities management. We know what's going on in those buildings, whether it's multi-tenant or individual user. All of that knowledge is available to us, and we are increasingly working very, very hard to use that knowledge to support our business as we go to market, but also to support our clients. One thing I'll wrap up here as I think we're basically out of time, but anything misperception-wise related to the stock or the company that you think stands out to you that you want to highlight that we're just not focused enough on? I think this scale across four dimensions and the ability that gives us to push resources into secularly benefited areas, I think that's known a little bit, not the degree to which it should be known. I think there's a lack of appreciation for how much we've expanded our total addressable market. That's a very, very big part of our strategy and how we've been able to push into areas that we were not in before significantly through M&A. I think another thing is people, you often hear people, and you'll see when journalists write about us, they'll say, "Such and such brokerage does such and such." We are a big brokerage company now. As I said, we manage 8 billion sq ft of space. We have 22,000 people in our project management business around the world. We manage 800 data centers around the world. We're moving into critical infrastructure. We do far more than just those transactions. It is not just that we do far more. The scale of what we do, the financial magnitude of what we do is significantly greater, I think, than the general awareness would suggest it is. Great. We appreciate that. Thanks, Bob, for doing this. Thanks, everybody, for joining. Thank you.